Morale hits record high in Germany

Julian Harris
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GERMAN business confidence surprised observers by rising to another record high in February, the well regarded Ifo index showed yesterday.

The measure of business climate in the Eurozone powerhouse upticked to 111.2, from 110.3 last month. It marked the ninth straight month of private sector pick up, and bodes well for German GDP.

“After its winter dip, the German economy should return to above-trend speed very soon,” said ING’s Carsten Brzeski. “The economy will continue to fly high this year. Due to the well-balanced export mix, foreign trade will remain an important growth driver.”

Manufacturing was the strongest sector according to the Ifo survey, mirroring results from Markit’s purchasing managers’ index (PMI), also released yesterday.

Factory sector PMI struck a record high of 62.6 in February, according to the mid-month “flash” estimate.

And the whole German private sector scored its highest rate of growth for over four-and-a-half years, reaching 61.5. PMI scores over 50 indicate economic expansion.

“Today’s results confirm our view that German real GDP growth should account for at least one per cent quarter on quarter for the first three months of 2011,” Frank Engels of Barclays Capital.

Meanwhile, French PMI also rose, to a six month high of 59.5. However, the rise was driven by an increase in service sector activity, with jumped over the 60 mark (from 57.8), a seven month high.

“The two biggest economies of the Eurozone, accounting for around half of overall euro area GDP, are going strong,” said Ken Wattret of BNP Paribas.